Scientific Protein Laboratories — a Waunakee company spun off from Oscar Mayer Foods nearly 40 years ago — will be purchased by a Chinese manufacturer for $337.5 million, the two companies announced Thursday.
The acquisition by Shenzhen Hepalink Pharmaceutical will be complete in the first half of 2014, if regulators approve. Shenzhen was founded in 1998; its shares are traded on the Shenzhen Stock Exchange.
Scientific Protein Labs (SPL) and Hepalink both make the active pharmaceutical ingredient in heparin, a commonly used blood thinner. SPL also produces pancreatin, an enzyme replacement for people with cystic fibrosis and others whose pancreas does not function properly.
SPL’s Waunakee headquarters has 167 employees, and a Sioux City, Iowa, location has 34 employees. They will all keep their jobs, as will current managers, said chief executive Robert Mills. “From everything they’ve told me, numerous, numerous times, we are going to continue to run as if nothing has changed,” he said.
“They will invest in us so we can grow a little faster,” said Mills. “My hope is to bring more jobs to the area.”
SPL was founded in 1976 as an offshoot from Oscar Mayer, to make pharmaceutical and chemical products from animal processing byproducts. Heparin’s key ingredient is made from pig intestines, and pancreatin, from pig pancreases.
“It is probably the world’s largest manufacturer” of those two products, said Howard Teeter, CEO of Anteco Pharma, Lodi. Teeter was plant manager and vice president of operations at SPL from 1985 to 1994.
“I have a lot of respect for the company,” he said. “It’s a significant business in the community.”
Hepalink also is one of the world’s largest suppliers of processed heparin, the company said.
Legal problems diminished
In 2008, SPL and Deerfield, Ill.-based Baxter International — which takes SPL’s active ingredient and produces the heparin drug — were the target of numerous lawsuits related to contaminated heparin. The U.S. Food and Drug Administration said at least 149 deaths and several hundred injuries may have resulted from the contamination, linked to a plant SPL owned in China at that time.
Mills, who joined SPL in 2011, said the “vast majority” of personal injury lawsuits have been either settled or dismissed. “Eight remain on file that don’t have a current settlement pending,” he said.
It was not immediately clear if that included a lawsuit filed this past September in U.S. District Court in Illinois by Medefil, a Glendale Heights, Ill., company that makes the syringes in which heparin is packaged.
Terms and amounts of the settlements were not immediately available. But Mills said the lawsuits were not a reason to sell the company. It has been owned since 2006 by American Capital Strategies, a Bethesda, Md., private equity firm.
“Absolutely not. We are down to, hopefully, the very end of that situation,” Mills said. “My goal was to have us be part of another pharmaceutical company who understands what’s necessary ... to grow and move on.”
Mills also said Hepalink was not involved in the contamination problem. “To the best of my understanding, during the time frame where there was a potential for a shortage in the U.S., they were able to supply ... heparin without any issues,” he said.
Teeter said that while lawsuits “can never help,” he thinks SPL emerged stronger from the crisis. “The fact that it was Chinese heparin ... drove manufacturing back to the U.S. It was a bigger negative for Chinese suppliers than it was for Scientific Protein Labs,” he said.
Plans for growth
SPL’s Mills said combining with Hepalink will provide opportunities for SPL to introduce some new products and to expand its sales of the heparin ingredient to Latin America, and sales of pancreatin to China.
“Operating at the high level of U.S. and international safety standards, the combined company will continue its absolute commitment to global best practices in product safety and quality as a trusted supplier of ingredients for critical medicines,” Li Li, chairman and CEO of Hepalink, said in a statement.
Mills declined to disclose SPL’s annual revenues. “But we are pretty financially sound,” he said.
Teeter speculated the $300 million-plus purchase price is not a large multiple over revenues. “I would expect two or three times earnings. That’s a guess,” he said.
SPL owns 38.5 acres in the Waunakee Business Park. Its plant is 110,000 square feet, including an 11,000-square-foot expansion built in 2011 to house the pancreatin production.